How to Include 'Flow Thru' in Your Financial Statements
By David Lund Hospitality & Leadership Expert, The Hotel Financial Coach | May 07, 2017
'Flow Thru', this is my abbreviation, is a catch all phrase that measures how much made it through your business comparing one period to another. What made it through, from revenues to profit. Another term to describe this measurement is retention. A good analogy to grasp the concept of flow thru is to compare it to your paycheck. Imaging I give you a $1000 a week raise. The question then is how much will end up on your pay vs. how much got eaten up by higher taxes and other deductions. The same goes for additional revenues in your business. If revenues are $50,000 higher this month than the same month last year, how much of the $50,000 will make it through to the profit line. How much will flow?
...it's great that you increased the rate and overall revenues in my hotel, but what I really want to know is how much you will keep and give me in profits – anonymous hotel owner
Managing flow thru in your hotel is a key attribute to understanding the profit model for your hotel. The reason it is so important to understand is the different characteristics that emerge when revenues go up or down in different departments. Measuring flow thru by department and by key driver is the basis for understanding your hotels real financial results and most importantly its financial potential.
Here are some motherhood questions to get your 'Flow Thru' imagination going.
The overall revenues year to date are up by 1.3 million dollars how much
should flow in GOP?
Occupancy is up over last year by 5% - and the rate is up $15 as a result
room revenues are up $720,000 – how much should flow in rooms profit and